DeMarco under pressure - Chill out about Cyprus - Shares rebound - Lew arrives in Beijing - A tale of two terms for SEC nominee White - Himes in the middle

DeMARCO UNDER PRESSURE — FHFA Acting Director Edward DeMarco testifies before the House Financial Services Committee this morning amidst growing calls from consumer activists, state officials and many members of Congress for the administration to replace him with someone who would more supportive of efforts to aid home owners through principal reduction for underwater mortgages. Sen. Debbie Stabenow (D-Mich.) on Friday became the 46th member of Congress to call on President Barack Obama to replace DeMarco. And a very plugged-in D.C. source emails M.M.: “Real concern at the White House & Treasury that DeMarco is a key external factor depressing housing recovery.” More on possible replacements below.

CHILL OUT ABOUT CYPRUS — Guggenheim Washington Research Group’s Jaret Seiberg: “We are amazed at some of the hyperbole coming out of the Cyprus debacle. We see no threat to the U.S. deposit insurance system or to the U.S. banking system. The airwaves appear filled with those suggesting that U.S. depositors could face similar haircuts as those in Cyprus because the FDIC does not hold a dollar in reserves for every dollar in insured deposits.

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“We believe these critics fundamentally misunderstand how deposit insurance works. A dollar-for-dollar coverage mechanism would only make sense if the entire banking system were to become worthless overnight. Other than situations such as World War II, it is hard to see how that could happen. … We see no scenario under which Congress would force insured depositors to take haircuts if a big bank failed.”

‘LARGELY IRRELEVANT’ – NYT’s Andrew Ross Sorkin: “Never mind. The last 72 hours have been filled with breathless proclamations of impending disaster after the [EU] and [IMF] indicated that they planned to take money directly from depositors with bank accounts in Cyprus as part of a bailout of that country. … Mark J. Grant, a market commentator who has been predicting an economic apocalypse in Europe for years, went so far as to compare the terms of the bailout with ‘rape.’ … And yet here we are. And, well, nothing bad has happened. …

“Why? While the bailout of Cyprus is a fascinating case study and raises interesting theoretical questions about moral hazard for policy wonks and talking heads, here is the reality: It is largely irrelevant to the global economy. Cyprus is tiny; its economy is smaller than Vermont’s. And the bailout is worth a paltry $13 billion, the equivalent of pocket lint for those in the bailout game. Even the larger issue about bailing out a country by taking money from depositors — which quickly created outrage around the world — seems overblown.” http://nyti.ms/XWTE6Q

TREASURY STATEMENT — “The Treasury Department is monitoring the situation in Cyprus closely and Secretary [Jack] Lew has been speaking with his European counterparts. It is important that Cyprus and its euro-area partners work to resolve the situation in a way that is responsible and fair and ensures financial stability.”

MUST-SEE TV — Bloomberg TV this morning has RNC Chairman Reince Priebus at 8:35 a.m. to talk about the group’s rebranding effort and Rep. Paul Ryan at 8:45 a.m. to talk about his budget.

SHARES REBOUND — Reuters: “Asian shares rebounded on Tuesday from the previous session's steep falls, but investors remained wary over a bailout plan for Cyprus which was set for a parliamentary vote later in the day. Confidence was partially restored by news on Monday that the Eurogroup decided to give Cyprus more flexibility over a bank levy which is part of the bailout conditions. … A Greek finance ministry source said Cyprus would still need to raise 5.8 billion euros from the levy as planned, but could exempt smaller savings accounts from the levy than first planned.” http://reut.rs/ZC28ME

BREAKING: LEW ARRIVES IN BEIJING — AP/Beijing: “Chinese leader Xi Jinping said Beijing wants strong ties with Washington as he held talks with the U.S. Treasury secretary on Tuesday in his first meeting with a foreign official since being appointed president. … ‘I attach great importance to China's relationship with the United States,’ Xi told Jack Lew in a meeting attended by diplomats and finance officials from both governments. ‘We stand ready to work with the U.S. side to continue to develop this China-U.S. cooperative partnership so that we will be able to open a path of cooperation between major countries.’

“The meeting was the first high-level contact between the two governments following a monthslong hiatus during the Chinese leadership transition that began with Xi being named Communist Party leader in November. He became president last week. Lew's department said he would raise issues including North Korea's nuclear program, Asia-Pacific security and allegations of Chinese government-sponsored cyberspying during his two-day visit. … ‘The president is firmly committed to building a relationship of growing strength,’ Lew said at the meeting in the Great Hall of the People, the seat of China's ceremonial legislature in Beijing.” http://n.pr/13756Pe

THIS MORNING ON POLITICO PRO FINANCE – Zachary Warmbrodt on why Senate Banking is only voting Tuesday to have Mary Jo White fill out Mary Schapiro’s term … MJ Lee takes a look at Jim Himes’ effort to tweak Dodd-Frank… Steven Sloan and Rachael Bade on how the sequester may lead to tax increases by local governments… To learn more about Pro's subscriber-only coverage -- and to get Morning Money every day before 6 a.m. -- please contact Pro Services at (703) 341-4600 or info@politicopro.com.

GOOD TUESDAY MORNING — Spring allegedly begins tomorrow, but you would not know it from the snow piling up outside M.M.’s window overnight. That little groundhog has a lot of explaining to do. As always, send your tips and comments: bwhite@politico.com; and follow on Twitter: @ morningmoneyben and @ POLITICOPro.

DRIVING THE DAY — DeMarco hearing begins at 10 a.m. … Vice President Joe Biden is in Rome for the Mass for the Inauguration of the Pontificate of His Holiness Pope Francis in St. Peter’s Square in Vatican City, which began at 4:30 a.m. EST (9:30 a.m. local time) … President Obama meets with Irish Prime Minister Enda Kenny in the Oval Office and attends a St. Patrick’s Day lunch at the Capitol. Late this evening, Obama departs for Tel Aviv, Israel … Senate Banking at 10 a.m. is scheduled to vote out nominations of Mary Jo White for SEC and Richard Cordray for CFPB.

Senate Banking has a housing reform hearing immediately after the votes featuring former HUD Secretary Mel Martinez and CAP’s Janneke Ratcliff … Housing starts at 8:30 a.m. EDT expected to rise to 915,000 from 890,000 … Senate expected to vote on a continuing resolution to fund the government through Sept. 30. The measure should clear the House by week’s end, clearing the way for members to head out for the two-week recess with no threat of a shutdown on March 28 … FOMC begins its two-day rate-setting meeting.

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BUDGET VOTE HANDICAPPING — Guggenheim’s Chris Krueger: “The Senate budget is privileged and enjoys special procedural protections. Total debate time on the Senate budget is capped at 50 hours (no filibusters), which is then followed by a daylong ‘vote-a-rama.’ The Senate budget only needs 50 votes to pass, provided Vice President Biden breaks the tie. There are 55 Democratic votes. … The House vote is going to be a nail biter for the House GOP leadership. The issue is twofold: the promise made to House conservatives that the FY14 budget would be balanced over 10 years and the deadline of April 15 (meaning they have to pass a budget).

“If the House does not pass a budget by April 15, per the debt ceiling suspension crafted by Republicans, Congressmen’s paychecks will be garnished. … There are a number of blue-state House Republicans (there are 15 who are in districts that President Obama won in 2012) who will have difficulty voting for such an austere budget and there are several House conservatives (look to the 14 who voted against the CR) who will likely fault the budget for not being suitably austere. There are 231 House Republicans and the GOP can ‘lose’ a maximum of 15 on a bill.”

MORE ON DeMARCO OPPOSITION – NYT’s Annie Lowrey: “Led by Eric T. Schneiderman of New York and Martha Coakley of Massachusetts, the attorneys general argue that writing down the principal on underwater mortgages … would aid the recovery. They note that write-downs were a central part of a multibillion-dollar mortgage settlement that 49 state attorneys general negotiated with five major banks a year ago. And they say the White House should name a director to take that action. … Mr. DeMarco has held the position at the head of the FHFA for more than three years. In the last year, especially, he has clashed with the administration over the issue of write-downs, also called principal forgiveness.

“An FHFA analysis released last year seemed to show that a carefully directed program could save Fannie and Freddie money. But Mr. DeMarco has rejected the idea on the grounds that it would expose taxpayers to more losses. … The [WSJ] reported that officials were considering nominating Rep. Mel Watt, Democrat of North Carolina, perhaps next month. The White House declined to comment. … Any director would probably be named as a recess appointment because he or she would be unlikely to win Congressional approval.” http://nyti.ms/XWsg9f

WILL OBAMA SEQUESTER THE EASTER BUNNY? (NOPE) — POLITICO’s Jonathan Allen: “The next casualty of sequestration could be the Easter Bunny — at least according to a White House email that recently landed in Capitol Hill inboxes. The White House warned Congress that budget uncertainties could nix the annual Easter Egg Roll for kids, which is planned for April 1. …

“A White House official said Monday that the egg roll is still going forward. … A White House official emails: … "Because we distribute tickets to the Easter Egg Roll far in advance, we alerted all ticket holders that this event is subject to cancellation due to funding uncertainty, including the possibility of a government shutdown. However, we are currently proceeding as planned with the Easter Egg Roll." http://politi.co/YOkwmg

CONTINUING RESOLUTION MOVES AHEAD IN SENATE — POLITICO’s David Rogers: “A stopgap bill to avert a government shutdown next week and keep agencies operating through September advanced in the Senate on Monday night — powered by a renewed bipartisan partnership in the Appropriations Committee leadership. On a 63-35 roll call, 10 Republicans joined Democrats to limit further debate on the 587-page package, which seeks to greatly expand on the House-passed version. … The strength of the vote all but assures passage, and Senate Majority Leader Harry Reid said it was his ‘sincere hope’ that this will occur [today] … All indications are once the Senate acts, the House Appropriations Committee leadership is prepared to take the modified Senate CR directly to the House floor, possibly as early as Thursday.” http://bit.ly/WSotZC

CYPRUS SCRAMBLES TO RENEGOTIATE — FT’s Kerin Hope in Nicosia, Peter Spiegel in Brussels and Charles Clover in Moscow: “Cypriot authorities scrambled to renegotiate the terms of a €10 billion bailout by moving to scrap its controversial levy on small account holders and instead seizing more from larger depositors and businesses.

The island’s banks were ordered to stay closed for two more days to avoid a bank run. … A senior EU official said international lenders were pushing the Cypriot government to exempt all deposit holders below €100,000. Instead, the IMF, the EU and the European Central Bank wanted a levy of 15.6 percent on all deposits above that level, many of which are held by Russians. The Kremlin earlier angrily denounced seizures of large Russian deposits even as Nicosia considered raising the proposed levy on larger deposits to over 15 percent. … The demands by smaller political parties to scrap the 6.75 percent levy on smaller accounts has pushed the newly elected Cypriot president into a corner, squeezed between his outraged electors and his country’s most important economic client.” http://on.ft.com/Xm4SMs

POLITICS BLAST: GOP MAKEOVER EFFORT IRKS RIGHT — POLITICO’s Jonathan Martin and Maggie Haberman: “The GOP’s prescription to cure the ills that helped bring on yet another disastrous presidential cycle would revamp its presidential nominating rules in ways to benefit well-funded candidates and hamper insurgents — a move that quickly heated up the already smoldering feud between the Republican establishment and the tea party-inspired base. … [T]he five-member panel urges halving the number of presidential primary debates in 2016 from 2012, creating a regional primary cluster after the traditional early states and holding primaries rather than caucuses or conventions.

“Each of those steps would benefit a deep-pocketed candidate in the mold of Mitt Romney. That is, someone who doesn’t need the benefit of televised debates to get attention … and has more appeal with a broader swath of voters than the sort of ideologically-driven activists who typically attend caucuses and conventions. The recommendations are also a nod to the party’s donor class. … Reaction was swift. Allies of potential 2016 hopefuls Sen. Rand Paul (R-Ky.) and … Rick Santorum, sensing a power play by the establishment-dominated panel, reacted angrily to recommendations they think are aimed at hurting candidates who do well in caucuses and conventions and need debates to get attention.” http://bit.ly/ZWcmHv

ALSO FOR YOUR RADAR –

COMING WEDNESDAY: COMMUNITY REINVESTMENT EVENT — Per the National Community Reinvestment Coalition (NCRC): “Starting … Wednesday … hundreds of community activists from across the country will be meeting in Washington, D.C., to discuss how to revitalize our neighborhoods and ensure banks and their regulators work not only to build their lines but also a more just economy that works for all Americans. … While Congress continues to punt on finding common sense solutions to the fallout from the Great Recession, community organizations and local governments have been left with no choice but to lead the way in fixing the problems they face every day.” Schedule: http://bit.ly/ZWaXRe

FARM BUBBLE SET TO BURST? — NYT’s Julie Creswell: “From the potato fields of Michigan to the high prairies of Kansas, farmers are receiving record prices for their land — but economists and banking regulators warn that this boom, like so many before it, could end badly. … In places like Waco, Neb., and Chickasaw County, Iowa, where the boom-and-bust cycle of farming reaches deep into the psyche, some families are selling the land that they have worked for generations, to cash in while they can. Behind the rush is the age-old driver of farm booms: high crop prices. Corn, in particular, has been soaring, reflecting demand overseas and, domestically, for ethanol. High prices mean good profits for farmers, and many are using their growing incomes to bid for land. Sensing opportunity, investment firms are buying, too.

“In Iowa, despite the drought last year, farmland prices have nearly doubled since 2009, to an average $8,296 an acre, far surpassing the last boom’s peak in 1979. In Nebraska, the price of irrigated land has also doubled since 2009. But if the price of corn falls — and many forecasters predict it will, particularly if the ethanol boom wanes — the price of farmland will fall with it. While many farmers have borrowed little money or used cash to finance their purchases, those who have overexpanded could run into trouble, leaving banks and other creditors with their bad debts.” http://nyti.ms/ZWdCKN

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Authors:

About The Author

Ben White is POLITICO Pro's chief economic correspondent and author of the “Morning Money” column covering the nexus of finance and public policy.

Prior to joining POLITICO in the fall of 2009, Mr. White served as a Wall Street reporter for the New York Times, where he shared a Society of Business Editors and Writers award for breaking news coverage of the financial crisis.

From 2005 to 2007, White was Wall Street correspondent and U.S. Banking Editor at the Financial Times.

White worked at the Washington Post for nine years before joining the FT. He served as national political researcher and research assistant to columnist David S. Broder and later as Wall Street correspondent.

White, a 1994 graduate of Kenyon College, has two sons and lives in New York City.